Excise duty - payable and actually payable

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Anil (Querist)
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07 June 2012 Excise duty liability arises as soon as goods are manufactured and it is to be paid after goods are moved out of factory for sale.

My question is:

Does the company normally , PRACTICALLY SPEAKING, passes following entries in respect of excise duty. I have assumed there is no CENVAT credit:

Excise duty expense……Dr
To Excise duty payable
(Being Goods manufactured)

Excise duty payable………..Dr
To ACTUAL Excise duty payable
(Being Part of the goods manufactured sold)

Note that with above entries in books of accounts there will be two accounts for excise duty liability:
1)Excise duty payable
2)Excise duty ACTUALLY payable.

Only excise duty actually payable is paid to dept.

Please let me know whether above entries are correctly passed. If not, what is the reason?

Amol S Joglekar

Amol S Joglekar (Expert)
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07 June 2012 When paid, the entry will be excise duty payable (Debit).....To Bank / Cash (Credit). The first entry is correct.

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Ca Anand Dubey

Ca Anand Dubey (Expert)
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07 June 2012 1.No need to make second entry if you crediting your sales inclusive of excise .
2.if you crediting your sales net of excise and making excise payble separately then excise duty actualy payble will be credited and first entry will be reversed

In both the above case while making payment do the entry as suggested by mr. amol

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Anil

Anil (Querist)
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08 June 2012 Thanks Sirs.

I have few more questions to Anand Sir:

1)In a case where sales includes excise duty - Why you are of the opinion that there is no need for second entry? I was thinking of second entry to know what amount ACTUALLY is payable to Govt. If I do not make second entry I will not know what amount actually is to be paid to Govt.

2)In a case where sale is net of excise you suggest reversing the first entry. I have this to ask regarding your suggestion:

Let us suppose I pass first entry during one year. If I revese it in next year - Excise duty expense A/c will show Credit balance. Is it ok to show an expense A/c balance as Credit?

3)What does IT Act (For tax Audit Audit report purpose or otherwise) or Accounting Standards say about booking of sales when there is excise duty. Should it be Gross or Net. Kindly quote Sections / Reules/ AS reference, if possible.

4)In a scenario where I pass second entry where should - Excise duty payable A/c (NOT ACTUAL payable account) be reflected in B/s. Should it be in Current liabiltiy or Long term liability. Please give me reasons.

Thanks.

Ca Anand Dubey

Ca Anand Dubey (Expert)
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09 June 2012 1. ok then do it
2.The balance of the excise duty expenses at the year end in both the cases will belong to the closing stock of finished goods and you have to include excise duty in the value of finished goods by doing so it will be passed to opening stock of next year .
In case of net sales ,if you sale the good next year you will have to reverse the entry with excise duty included in opening balance so no credit balance in excise duty expense will come.
so at the year end either make it nil in case of net sales or in case of gross sale match it with excise duty actually payable, or if you want to show it then include it value in closing stock. your profit should be intact and not be affected by such entry
3.as and it act say that if your finished goods include value of excise duty then you have to make provision for it in p/l

4.current liability as it belongs to closing stock/stock in trade